The escalation of energy continues on all fronts, making more and more of a dent in the pockets of Spanish consumers. The price of gasoline this week has marked its maximum since September 2013, according to the latest Oil Bulletin of the European Union, just one step away from 1.45 euros on average. After rising 1.2% in the last seven days, it has already accumulated a month and a half of uninterrupted rise. In parallel, diesel is at its highest since July 2014 after becoming more expensive by almost 2% in the last week and exceeding 1.33 euros. Filling the tank with gasoline and diesel is today, respectively, 26% and 30% more expensive than a year ago, when the demand for crude was still greatly affected by the pandemic and prices remained at low levels. The oil barrel brent, the reference in Europe, is exchanged today for 84 dollars, more than double than then.
Despite the recent rise in price, common to all European countries, the price of 95% unleaded gasoline in Spain is still slightly lower than the EU average (1.61 euros per liter) and that of the United States. countries that share the euro as a currency (1.67 euros per liter). The gap is also substantial in the case of diesel: each liter costs, respectively, 1.47 and 1.49 euros in the 27 and euro zone average. In both cases, the difference between Spain and its neighbors responds to the lower tax burden on fuel.
Light, above 200 euros per MWh 24 hours
The rise in fuel prices is by no means the only headache for households on the energy side. This Friday, the price of electricity in the Spanish wholesale market will skyrocket by 7.5% to 231.82 euros per megawatt hour (MWh), the second highest daily record ever after the 288.53 euros marked just ago one week. In the first half of October, the light has been placed up to eight times above 200 euros, including tomorrow. Its price, in addition, six times that of a year ago, when it did not reach 40 euros.
By time slots, as can be seen from the data published by the Iberian Energy Market Operator (OMIE), electricity will reach its peak this Friday between nine and ten in the morning, when it will reach 265 euros per MWh. Although the oscillation will be low, the cheapest time to consume electricity will be between four and five in the afternoon, when it will be around 201 euros. This means that during the 24 hours of the day, early morning included, the cost per megawatt hour will be higher than 200 euros, a figure that no one could imagine not so long ago. Behind this brutal price escalation, several factors emerge: the historical highs in the price of natural gas, from which the combined cycle plants are fed; the increase in the price of CO2 emission rights so far this year; and the low intensity of the wind, on which the wind depends.
The transfer of these prices to the retail bill is immediate in the case of the 10.7 million families that have contracted the regulated tariff, but not in the case of the 16 million customers that have a free market contract. In the latter case, the increase will presumably come when the expiration date of the same arrives and they have to negotiate a new one with their supplier, which is the one that is currently assuming the increase in MWh in the wholesale market.
Blow for the industry
The escalation does not only affect households. Some big names in Spanish industry, such as Sidenor, Fertiberia, Ferroatlántica or Asturiana de Zinc, have begun to apply production stoppages in recent weeks due to the energetic escalation – not only in electricity, but also in natural gas, which they use as raw material in its processes. And electrointensive companies, those in which this represents up to 60% of their costs, project that this year they will pay 1,500 million euros more than their European competitors, a dynamic that – they denounce – is “putting their survival in check.” This is calculated by the Association of Companies with High Energy Consumption (AEGE), which complains of the “lack of protection” to which its members are exposed to electricity companies.
According to the figures from the electrointensive power companies’ association, at the beginning of October the differential in electricity prices compared to its main German and French competitors was 38 and 74 euros per MWh, respectively. This higher cost has a direct impact on its income statement and reduces the competitiveness of the sector: just two years ago, just before the health crisis, the gap was 20 and 25 euros per MWh, respectively.
The IEA: “Gas, light and coal can be a problem for recovery”
After warning 24 hours before the risk of more price crises in the future due to the lack of investment in the energy sector, the director of the International Energy Agency (IEA), Fatih Birol, has warned this Thursday that the increase in price of energy is a major stick in the wheel for the post-pandemic economic rebound. “In Europe we are seeing very high gas, electricity and coal prices, which put pressure on inflation figures and which, at the same time, can be a significant problem for the European recovery,” he remarked.
The head of the arm of the Organization for Economic Cooperation and Development (OECD) for energy issues has insisted, however, that the increase in prices has nothing to do with the desired decarbonization of the economy and has again denounced an “unfair campaign” that attributes the increased cost to the transition to non-polluting sources.